EON SE, Germany’s biggest utility, is seeking to rescue its Brazilian venture with former billionaire Eike Batista by leading a second round of private investment in less than a year.
EON will contribute as much as 570 million reais ($257 million) of the 1.5 billion reais Eneva SA plans to raise in a two-stage capital increase, Rio de Janeiro-based Eneva said today in a statement. Creditors Grupo BTG Pactual, Citigroup Inc., HSBC Holdings Plc. and Itau Unibanco Holdings SA agreed to extend loan maturities for five years and transfer 600 million reais of debt to units of Eneva, the company said. EON, which became the largest shareholder a year ago, won’t increase its stake beyond 49.9 percent.
Eneva, which was listed by Batista as a startup in 2007, dropped to a record low on May 2 amid project delays that increased costs and forced it to buy higher-cost energy on the spot market, deepening its losses. Management, led by former Goldman Sachs Group Inc.’s co-head of Brazilian investment banking, Fabio Bicudo, has sought to bolster finances since his appointment in February.
The utility also said in today’s statement it will sell at least 50 percent of its Pecem II project in the northeast, with EON offering to buy up to 50 percent of the power plant for as much as 400 million reais. The company also will receive a bridge loan of 100 million reais from the four banks, it said.
The transaction “brings some substantial equity to the company, pushes our debt maturities, allows us to resume focus on what a normal company should be and allows management now to implement important cost reduction measures,” Bicudo said today in an investor conference call.
The first stage of the capital increase, where each Eneva share will be subscribed at 1.27 reais for a total 316.5 million reais, will see Batista’s stake diluted to as little as 17.6 percent, assuming the entrepreneur doesn’t participate of the offering, according to a company presentation.
The press office for Batista declined to comment on whether he will take part in the capital increase. He currently holds 23.9 percent of Eneva and EON owns 37.9 percent.
“Over the past several months Eneva has delivered a good operational performance,” EON board member Jorgen Kildahl said today in a separate statement. “We’re pleased that –- together with the other main shareholders and banks providing financing - – we’re able to support Eneva’s management to realize the company’s significant potential.”
Eneva jumped 10 percent to 1.40 reais at the close in Sao Paulo, leading Brazil’s Ibovespa small cap index. The stock slid 83 percent in the last 12 months. EON rose 1.2 percent to 13.58 euros in Frankfurt, its highest close this month.
While Eneva has become the biggest private thermoelectric generator in the country, it posted a record loss of 942.5 million reais last year and its debt-to-market value ratio is the highest after state-owned Centrais Eletricas Brasileiras SA among 150 major utilities in the Americas tracked by Bloomberg.
The capital injection announced today is the second for Eneva in less than a year. EON sank 367 million reais into the company in July as part of an 800 million-real capital increase, following the purchase of a 24.5 percent stake from Batista for 1.4 billion reais earlier last year.
Once the world’s eighth-richest man, Batista has been selling assets or stakes in his energy, mining and logistics ventures for the past year as missed targets and mounting debt forced him to cancel projects. He stepped down as chairman of Eneva July 3 and the company changed its name from MPX Energia in September as EON moved to restore credibility.
EON bought an initial 10 percent stake in 2012 for 850 million reais and laid out plans for a grand partnership with the Brazilian entrepreneur, whose mother was German and who speaks the language after spending some of his youth in Dusseldorf, the city where EON is based.
Eneva had total debt of 6.2 billion reais at the end of last year, of which 2.4 billion reais is maturing in the short term, according to data compiled by Bloomberg.